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    Operations Management


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    1 : Operations Management Toyota Production System (TPS), Just-in-Time (JIT), and Lean Manufacturing Handout Dr. Ahmad Syamil, CFPIM, CIRM, CSCP asyamil AT yahoo DOT com
    2 : APICS Old Name: The American Production and Inventory Control Society New Name: The Association for Operations Management - Advancing Productivity, Innovation, and Competitive Success. APICS offers four internationally recognized professional certification programs: CPIM: Certified in Production and Inventory Management CFPIM: Certified Fellow in Production and Inventory Management = CPIM + extensive knowledge sharing with others through presenting, teaching, publishing, and other APICS educational activities. CIRM: Certified in Integrated Resource Management Beginning 2006: Certified Supply Chain Professional (CSCP) designation is designed for professionals interested in increasing their knowledge of supply chain management, those currently working in the field of supply chain management (SCM), and for those individuals working with enterprise resources planning (ERP) systems.
    3 : Why Toyota?
    4 : Toyota is now the world's largest carmaker Toyota sold 2.348 million vehicles in the first three months of 2007. General Motors (GM) is estimated to have sold 2.26 million cars and small trucks during the same period.
    5 : Why Toyota?
    6 : Why Toyota?
    7 : Why not Toyota? GM lost $10.6 billion in 2005. GM's pension obligations under funded by about $31 billion GM will eliminate 30,000 jobs and close 12 North American factories by 2008 Ford earned $2 billion worldwide, but lost $1.6 billion in its North American operations. Ford is shutting 10 plants and laying off 25,000 hourly workers. Daimler paid $36 billion for Chrysler in 1998. Chrysler reported a $1.5 billion loss for the third quarter of 2006 and a $2 billion loss for the first quarter of 2007. DaimlerChysler finally sold 80.1% of Chrysler to Cerberus Capital for $7.4 billion in May of 2007.
    8 : Why Toyota?
    9 : History of Manufacturing Management
    10 : History Sakichi Toyoda, the founder of the Toyota group of companies, started Toyota as a textile machine company. Kiichiro Toyoda, son of Sakichi and founder of the Toyota automobile business, developed the concept of Just-in-Time in the 1930s. He decreed that Toyota operations would contain no excess inventory and that Toyota would strive to work in partnership with suppliers to level production. Taiichi Ohno, Toyota's chief of production in the post-WWII period. He was THE main developer of Toyota Production System (TPS). Dr. Shigeo Shingo: A consultant to Toyota. PS: Shingo Prize is the highest manufacturing excellence award in the U.S. The prize is given both to companies and individuals who contribute to the development of manufacturing excellence.
    11 : History (cont.) Toyota Production System (TPS) drew wide attention from the industrial community because Toyota was the most profitable company in Japan after the oil embargo in 1970s. Outside Japan, dissemination began in earnest with the creation of the Toyota-General Motors joint venture-NUMMI (New United Motor Manufacturing Inc.) in California in 1984. Widespread recognition of TPS as the model production system grew rapidly with the publication in 1990 of The Machine That Changed the World: The Story of Lean Production, the result of five years of research led by the Massachusetts Institute of Technology. The MIT researchers found that TPS was so much more effective and efficient than traditional, mass production that it represented a completely new paradigm and coined the term lean production to indicate this radically different approach to production. The term was coined by John Krafcik, a research assistant at MIT with the International Motor Vehicle Program in the late 1980s. He then worked for General Motors and now is a Vice President of Hyundai, U.S.
    12 : Toyota Production System (TPS) Definition: The production system developed by Toyota Motor Corporation to provide best quality, lowest cost, and shortest lead time through the elimination of waste. TPS is comprised of two pillars, Just-in-Time and Jidoka (autonomation) , and is often illustrated with the "house" shown on the next slide. TPS is maintained and improved through iterations of standardized work and kaizen (continuous improvement), following Plan–Do-Check-Act (PDCA Cycle from Dr. Deming), or the scientific method.
    13 : House of Toyota
    14 : Toyota Production System (TPS): Related Terms Ohno System MAN (Material as Needed) - Harley Davidson MIPS (Minimum Inventory Production Systems) - Westinghouse Stockless production - Hewlett Packard Zero inventory production system Lean Manufacturing/Production - MIT
    15 : How to make money? Profit equation: Sales – Cost = Profit Traditional pricing strategy: Cost + Profit = Selling price Example: When the cost goes up, the product selling price is raised to reflect the higher costs and maintain the desired level of profit. Some even argues that the profit added should be large enough to cover potential losses if the product does not sell well. Toyota accepts neither this formula nor these arguments!
    16 : Toyota’s philosophy Selling price – Cost = Profit Customers decide the selling price. Profit is what remains after subtracting the cost from it. The main way to increase profit is to reduce cost. Consequently, cost reduction through waste elimination should have the highest priority. Toyota’s paradox: Reducing cost (waste), will reduce lead time while increasing quality and customer satisfaction. How? We will discuss it soon.
    17 : House of Toyota
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    20 : Attacks waste Anything not adding value to the product From the customer’s perspective Exposes problems and bottlenecks caused by variability Deviation from optimum Achieves streamlined production By reducing inventory What Does Just-in-Time Do?
    21 : Waste (“muda” in Japanese) is ‘anything other than the minimum amount of equipment, materials, parts, space, and worker’s time, which are absolutely essential to add value to the product.’ — Shoichiro Toyoda Founder, Toyota © 1995 Corel Corp. Introductory Quotation
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    23 : Variability Occurs Because Employees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantity Engineering drawings or specifications are inaccurate Production personnel try to produce before drawings or specifications are complete Customer demands are unknown
    24 : Continuous Flow Producing and moving one item at a time (or a small and consistent batch of items) through a series of processing steps as continuously as possible, with each step making just what is requested by the next step. It is also called the one-piece flow, single-piece flow, and make one, move one.
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    26 : Continuous Flow Production
    27 : Push versus Pull Push system: material is pushed into downstream workstations regardless of whether resources are available Pull system: material is pulled to a workstation just as it is needed
    28 : Traditional U.S. Manufacturing Firm: Push (“old style” MRP / Material Requirements Planning System) The production of items at times required by a given schedule planned in advance Material Information (Production Schedule) Work Station 1 WS 2 WS 3
    29 : Pull (JIT) System The production of items only as demanded for use or to replace those taken for use. Material Information (via Kanban/Card) Work Station 1 WS 2 WS 3
    30 : Japanese word for card Pronounced ‘kahn-bahn’ (not ‘can-ban’) Authorizes production from downstream operations ‘Pulls’ material through plant May be a card, flag, verbal signal etc. Used often with fixed-size containers Add or remove containers to change production rate Kanban
    31 : Triangular Kanban
    32 : Kanban
    33 : Figure S12.5
    34 : Basic Fixed-Order Quantity Model and Reorder Point Behavior
    35 : Kanban The function of Kanban ˜ The function of Inventory Reorder Point (ROP)
    36 : Kanban System Single card Move only containers with C (Conveyance)-kanban) e.g.: Kawasaki Dual card Move only container with C- kanban Produce only when authorized by P (Production)- kanban e.g.: Toyota Transparency 17.5
    37 : Traditional: inventory exists in case problems arise JIT objective: Eliminate inventory JIT requires Small lot sizes Low setup time Containers for fixed number of parts JIT inventory: Minimum inventory to keep system running Inventory
    38 : Reduce ripple effect of small variations in schedules (e.g., final assembly) Production quantities evenly distributed over time (e.g., 7/day) Build same mix of products every day Results in many small lots 1 month = 20 working days Item Monthly Quantity Daily Quantity A 40 2 B 60 3 Heijunka = Leveling (Smoothing) Production Schedule using Mixed Model Sequencing
    39 : A A A B B B C JIT Small Lots Large-Lot Approach Time Time A A B B B C A A A B B B B B B C C JIT produces same amount in same time if setup times are lowered Small versus Large Lots Small lots also increase flexibility to meet customer demands
    40 : Photo S12.4
    41 : Heijunka = Leveling (Smoothing) Production Schedule using Mixed Model Sequencing Product Demand Requirements Monthly Daily A B C Largest integer that divides into all daily requirements evenly is 10 Product Daily Requirements Divided by 10 A B C Mixed-model sequence A-B-A-B-A-B-A-B-C Repeat 10 times per day Transparency 17.7 Determining Production Sequence
    42 : Cycle Times Working time per day = 480 minutes Daily requirements: A = 40 units; B = 40 units; C = 10 units The system cycle time = 480/(40+40+10) = 5.33 min/unit Product Requirements Cycle Time A 40 B 40 C 10 Transparency 17.8
    43 : Lowering Inventory Reduces Waste
    44 : Lowering Inventory Reduces Waste
    45 : Lowering Inventory Reduces Waste
    46 : To Lower Inventory, Reduce Lot Sizes
    47 : Customer orders 10 Lot size = 5 Lot 1 Lot 2 Lot size = 2 Lot 1 Lot 2 Lot 3 Lot 4 Lot 5 Reducing Lot Sizes Increases the Number of Lots
    48 : …Which Increases Inventory Costs
    49 : Unless Setup Costs are Reduced
    50 : Quick setup = Quick changeover Reducing setup cost ˜ reducing setup time Setup reduction time is a prerequisite to lot size reduction SMED: Single Minute Exchange of Dies The method has been developed by Toyota and then expanded by Dr. Shigeo Shingo (a consultant to Toyota), and has proven its effectiveness in many companies by reducing changeover times (non-value added times) from hours to a less than 10 minutes
    51 : Setup Components • Internal Setup: consists of setup activities that must be performed while the machine is stopped. • External Setup: consists of setup activities that can be carried out while the machine is still operating. It is desirable to: Convert as much internal setup to external setup Improve the setup procedure
    52 : Systematic Setup Reduction
    53 : Setup Reduction
    54 : Setup Reduction: Standardizing die holder heights reduces the need to exchange fastening bolts
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    56 : Setup Reduction Techniques
    57 : Quality At The Source Jidoka allows workers to stop production line Andon lights signal quality problems Under capacity scheduling allows for planning, problem solving & maintenance Visual control makes problems visible Poka-yoke prevents defects
    58 : House of Toyota
    59 : Jidoka Toyota Production System (TPS) is supported by two pillars: Just-in-Time and Jidoka Jidoka = Autonomation = Automation with “human” intelligence. Sakichi Toyoda, founder of the Toyota group of companies, invented the concept of Jidoka in the early 20th Century by incorporating a device on his automatic looms that would stop the loom from operating whenever a thread broke. Dr. Shigeo Shingo then developed his idea further. This enabled great improvements in quality and freed people up to do more value creating work than simply monitoring machines for quality (separating people’s work and machine’s work). Eventually, this simple concept found its way into every machine, every production line, and every Toyota operation.
    60 : Jidoka Techniques Poka-yoke (mistake or error proofing) A form of device for building-in quality at each production process. This device may take many shapes and designs. Typical types of Pokayoke are sensors, proximity switches, stencils, light guards and alignment pins. Simple circuitry is usually used to operate these electrical error proof devices as they should be of low cost and simple design. Goal: Finding defects before they occur = Zero Defects Statistical Quality Control (SQC): Finding defects after they occur Visual management including using Andon Lamp
    61 : Poka-Yoke Example Exhibit 7.10
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    64 : Visual Management Andon Lamp Red - line stoppage Yellow - call for help Green - normal operation
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    67 : Kaizen Change for better = continuous improvement Kaizen workshop or Kaizen event: A group of Kaizen activity, commonly lasting five days, in which a team identifies and implements a significant improvement in a process, e.g., creating a manufacturing cell.
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    69 : GEMBA GEMBA" is a Japanese word meaning "real place", where the real action takes place. In business, GEMBA is where the value-adding activities to satisfy the client are carried out. Manufacturing companies have three main activities in relation to creating money: developing (designing), producing and selling products. In a broad sense, GEMBA means the sites of these three major activities. In a narrower context, however, GEMBA means the place where the products are made. The term is often used to stress the that real improvement can only take place when there is a shop-floor focus on direct observation of current conditions where work is done, e.g., not only in the engineering office.
    70 : Five Golden Rules of Gemba Masaaki Imai promoted Kaizen to people outside Japan through his two highly acclaimed books: 1. Kaizen: The Key To Japan's Competitive Success. 2. Gemba Kaizen: A Commonsense, Low-Cost Approach to Management He preaches the Five Golden Rules of Gemba, the first of which is 'When a problem (abnormality) arises, go to gemba first'. So what's gemba? It's the shop floor, or equivalent. Once there, you apply Golden Rule Two: check with gembutsu (relevant objects). Three: take temporary counter-measures on the spot. Four: find the root cause. Five: standardize to prevent recurrence. Standardization is the managing part of getting good gemba. You also need good housekeeping (Imai is very keen on cleaning machines) and muda, the elimination of waste. But all hinges on getting away from your desk. Obey the master Imai. GO TO GEMBA!
    71 : 5Whys: Finding the root cause of a problem. 5 Whys analysis as an effective problem-solving technique. It is also used in Six Sigma. Example: Why is our client, Hinson Corp., unhappy? Because we did not deliver our services when we said we would. Why were we unable to meet the agreed-upon timeline or schedule for delivery? The job took much longer than we thought it would. Why did it take so much longer? Because we underestimated the complexity of the job. Why did we underestimate the complexity of the job? Because we made a quick estimate of the time needed to complete it, and did not list the individual stages needed to complete the project. Why didn't we do this? Because we were running behind on other projects. We clearly need to review our time estimation and specification procedures.
    72 : Plan-Do-Check-Act (PDCA/Shewart /Deming Cycle) Plan: Go to the real place/factory flow (gemba), obverse the real thing/product (gembutsu), get the real fact (genjitsu). Focus on reducing response time, lead times, exposing wastes in your process Do: Conduct Kaizen. Create models of excellence so others can aspire to. Flow everything: product, information material replenishment, services. Check for direction by aligning activities with long-term business direction Act: Take actions to sustain and accelerate improvement activities Source:
    73 : Similarity between 3 Gs and MBWA The 3 G's (Gemba, Gembutsu, and Genjitsu, which translate into “actual place”, “actual thing”, and “actual situation”). In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Senior H-P managers were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which viable strategies could be crafted.
    74 : 5S: Workplace organization/Housekeeping 5s: Important part of Kaizen/Lean Manufacturing The S's stand for: Seiri - keep only what is absolutely necessary, get rid of things that you don't need, i.e. simplify or sort. Seiton - create a location for everything, i.e. organize or straighten. Seiso - clean everything and keep it clean, i.e. cleanliness or sweep. Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e. standardize. Shitsuke - assure that everyone continues to follow the rules of 5S, i.e. stick to it or self discipline. 5S in the US: Sort, Straighten, Sweep, Standardize, Self Disciple 5S + 1S (Safety) = 6S (Hytrol, etc) 5S + 2S (Safety and Security) = 7 S (Agilent Technology that was part of Hewlett Packard)
    75 : 5S 5S is simple to begin and gives good benefits. Each individual in an organization is asked to get rid of overburdening items. Red tag attack: A red tag attack is the strategy of a group of people going through the plant and putting red tags on everything that has not been used within the last 30 days. The items that people feel are necessary to "hold on to" must be justified to their superior, or the item is taken out of the plant!
    76 : 5S in a Factory Factory tour: Toyota vs. others.
    77 : 5S in Office Before 5 S After 5 S
    78 : Standard Work When manpower, equipment, and materials are used in the most efficient combination, this is called Standard Work. There are three elements to Standard Work: 1) Takt Time 2) Work Sequence 3) Standard Work-in-Process Once a Standard Work is set, performance is measured and continuously improved.
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    81 : The Importance of Standardized Work: Without it, all improvement efforts using Kaizen to eliminate waste (muda) are not sustainable. You will go back to the original position before Kaizen.
    82 : Manufacturing Cell
    83 : Worker Routes Lengthened as Volume Decreases Figure 11.4
    84 : Workload balancing Aims at maximizing operator utilization based on the given takt time. Is the key to adjust JIT lines to demand fluctuations Requires flexible operators
    85 : Production Line Balancing
    86 : Improving Lead Time:
    87 : Value Stream MappingSM What? Why? Who? When? Where? How? A visual tool for identifying all activities of the planning, and manufacturing process to identify waste. Provides a tool to visualize what is otherwise usually invisible. The leaders of each product family need to have a primary role in developing the maps for their own area. Develop a current-state map before improvements are made so that the efforts and benefits can be quantified. On the shop floor, not from your office. You need the real information, not opinion or old data. Next page
    88 : Value Stream Map Symbols Spot weld ABC plating C/T = 30 sec C/O = 10 min 3 shifts 2% scrap rate Process Finished goods Vendor Data box 3,000 units = 1 day Inventory Push Supermarket: the location of a predetermined standard inventory Physical pull Mon and Wed Shipment C/T = Cycle Time C/O = Change over or setup time
    89 : Current Value Stream Map
    90 : Future Value Stream Map
    91 : Attributes of Lean Producers - they use JIT to eliminate inventory build systems to help employees product a perfect part every time reduce space requirements develop close relationships with suppliers educate suppliers eliminate all but value-added activities develop the workforce make jobs more challenging reduce the number of job classes and build worker flexibility apply Total Productive Maintenance (TPM)
    92 : The Five Steps of Lean Production/Toyota Production System Implementation Step 1: Specify Value Define value from the perspective of the final customer. Express value in terms of a specific product, which meets the customer's needs at a specific price and at a specific time. Step 2: Value Stream Mapping. Identify the value stream, the set of all specific actions required to bring a specific product through the three critical management tasks of any business: the problem-solving task, the information management task, and the physical transformation task. Create a map of the Current State and the Future State of the value stream. Identify and categorize waste in the Current State, and eliminate it! Step 3: Create Continuous Flow Make the remaining steps in the value stream flow. Eliminate functional barriers and develop a product-focused organization that dramatically improves lead-time. Step 4: Create Pull Production Let the customer pull products as needed. Step 5: Perfection There is no end to the process of reducing effort, time, space, cost, and mistakes. Return to the first step and begin the next lean transformation, offering a product which is ever more nearly what the customer wants.
    93 : Comparison of MRP (Material Requirements Planning), JIT, and TOC (Theory of Constraints) Transparency 17.17 (Exhibit 17.15) Loading of operations Batch sizes Importance of data accuracy Speed of scheduled development Flexibility Cost Goals Planning focus Production basis Checked by capacity requirements Planning afterward One week or more Critical Slow Lowest Highest Meet demand Have doable plan Master schedule Plan Controlled by kanban system Small as possible Unnecessary Very fast Highest Lowest Meet demand Eliminate waste Final assembly schedule Need Controlled by bottleneck operation Variable to exploit constraint Critical for bottleneck and feeder operations Fast Moderate Moderate Meet demand Maximize profits Bottleneck Need and plan MRP JIT TOC

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